Wednesday, September 2, 2015

Life Insurance- Things to Know

Life Insurance
It doesn't have to be difficult

As many people who have sought to find life insurance, it is a touchy, difficult, confusing, stressful subject. Life insurance has multiple elements that honestly don’t come to attract interest for many people, such as; the plain boring content, expense, and the many conflicts of interest that ‘could’ arise. That is not to mention the complicated process many people think tags along with shopping for insurance.

Purchasing the ‘correct’ amount of life insurance is one of the most crucial mistakes people make when purchasing life insurance, let along auto, dental or health insurance. It’s not necessary to get the most expensive, best coverage or highest amount possible. It’s crucial to get the best plan that works for you and your family.

“According to the Life Insurance and Market Research Association, more than 30 million Generation X and Y households surveyed reported that they needed more life insurance in 012. One-third of wives own no life insurance at all.” That’s scary! Insurance is a touchy subject for all, and it’s no argument that it should be. If you are interested in insurance, great! If you aren’t, that's fine too. I personally suggest you consider when the time is right for you and your family; because unfortunately accidents do happen and we will never know when and where those will happen. Leaving family without the reassurance can be devastating.

The figures of 1/3 of all wives (surveyed) not having insurance is bewildering. Within that same survey, people confirmed the 'peace of mind' life insurance gave them. As I mentioned before, it is no secret that life insurance can leave a family devastated beyond the death of a loved one. The reassurance plays an acute role in the future of loved one’s after death.

Insurance is no doubt stressful, but confusing to say the least. “LIMRA found that the main reason people don’t buy insurance is because they believe they can’t afford it and they have other financial priorities. However, the survey also showed that consumers seriously overestimate the cost of life insurance by as much as threefold.”

YES, YES, YES! I couldn’t agree more. I had the opportunity to continue my education and learn about insurance, as well as have a 'crazy' mother. I mean that with much love. I love her more than I could ever express, but she is by far more informed that I could ever have dreamed about what life throws at you. As I became a young adult, she explained how much insurance cost and why we had to budget from month to month. I can’t lie, I dreaded the day I had to go out on my own with insurance, taxes, and etcetera. In the meantime, she emphasized the importance of having insurance. Yes, you have to budget but no, it won’t break you. You don’t need to have the biggest, best, and most expensive of everything (I think that was a hint outside of our then insurance based conversation too, if you know what I mean). I get it, I really do now! She instilled that it is not as much money as you think as long as you live within your means and shop around. We all know although we don't all admit, living 'within your means' is widely disoriented in today's society; as teenagers 'cannot' live without hairspray or their cell phones as well as much of society cannot find peace within themselves; but that is when we need to really dig deep and look at what is best for ourselves and our families- now and in the future. That’s right, it’s a little work on your end. It’s okay to make the wrong decision when choosing insurance too. It’s one of those ‘live and learn’ experiences sometimes. “10 percent of consumers were concerned about making the wrong decision and 8 percent simply gave up because of a lack of knowledge about insurance.” If you believe, you will achieve.

Take a look at a few basic steps that may help you find insurance, even through tough times:

-          Do you need insurance?
o   As I mentioned previously, life insurance isn’t right for everyone. It just isn’t. Some people will argue it is, but it’s a personal life choice of each individual. Many young adults without dependents opt to go without life insurance. In the meantime, some young adults that plan to have children dependent on them someday opt to buy insurance young to help guarantee them and their dependents future. (Just make sure you are paying your premiums or it is defrauding the entire concept.) It’s not always true that “you should buy insurance young to lock in your premiums.” As a general rule, insurance premiums are determined by your age, gender and risk classification.
-          There are a couple of way to estimate how much insurance you need.
o   Income Replacement: “This approach considers your age and earnings. It generally produces a higher number than a needs-based approach. You start with your age and determine how many years of income you would need to replace in the event of your death. For example, if you are 40 years old, you might decide to buy insurance that would pay 15 to 20 times your yearly income.” This method can be extremely vague, not modifying to your exact circumstances but works well for many people. 
o   Needs-based: “This approach considers your particular situation and assesses the impact of your death on your dependents. Factors to consider include whether your spouse or partner would continue or start to work, the number of children you have, whether there is a mortgage you want to pay off and the cost of educating your children.” It all depends on your circumstances and your needs. I prefer to look at insurance on a 'needs-based' method, but it does take more time and reflection on your life to get it correct. There are several websites that can aide in calculating the amount of insurance that would benefit you too.
-          Determine the type of insurance you need.
o   Term and Cash value insurance are the two 'most basic' types of insurance. Cash value insurance can also be referred to as 'permanent insurance'. Term has no 'investment component', meaning you basically decide how much coverage you want and the period of time you want to be protected. Term insurance generally has lower premiums than permanent insurance; meaning your monthly payment is less. Just because it’s 'cheaper' up front, doesn’t necessarily mean it’s the best plan for you. In most cases, people spend the difference in what they pay in premiums and what they would be paying for a different plan on non-necessities (shopping, pleasure, etc.). Meanwhile, those with younger children or those in financial binds, term insurance will provide the most coverage for the lowest premium. “By the end of the term, your need for the insurance may be reduced or eliminated.” Remember, don’t settle; you can shop for insurance on custom insurance company websites to find the best option for you.
o   Permanent insurance (Cash-value) is a bit more confusing, but we can work through it! Personal finance plays a big role when looking into a permanent insurance policy. It can be difficult to understand, but be of excellence at the same time! Be sure to find an insurance 'salesperson' that is willing to explain in detail your policy and all your options. You read that right, you have options! “Some insurance salespeople use its complexity to their advantage and attempt to sell high-commission policies when other policies would be more suitable.” Don’t be alarmed, it’s part of life. There will always be people who only look out for themselves and only themselves as the number 1. Doing a bit of research on insurance companies and their history is a great start to knowing where to start. It doesn’t have to be hours of research; simply google a few companies and look into ratings, history, etcetera. You can narrow it down as you go. Be sure to know what 'you want'. I say that vaguely because you don’t necessarily know what 'you want', but more the simple fact of " I want coverage."“If your annual premium for insurance will be $10,000 a year or more, consider retaining a fee-only insurance advisor, one who doesn’t have any financial stake in your decision.” I personally use Thrivent Financial for my life insurance needs because it works for ME. I personally feel my agent works for me, rather than the other way around. “These advisors can save you far more than their fee, and you can feel more assured their advice is objective and in your best interest.”

Again, shop around! Take a few minutes out of your day to look into what your future may and may not hold. Make goals for yourself, both short and long term. This will help you consider what is best for you and your family as well as what truly molds your personal well-being.

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Article Reference:

Dolin, Daniel. “3 Things You Should Know About Life Insurance” US News Money. US News & World Report LP, 18 February 2014. Web. 02 September 2015.

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